How is the amount of liquidated damages calculated if The Standardx franchise agreement is terminated?
The_Standardx Franchise · 2025 FDDAnswer from 2025 FDD Document
| Section | Subject | Applicable Term | |
|---|---|---|---|
| 16.5 | Liquidated Damages | (a) the lesser of thirty-six (36) or the number of months then remaining in this Agreement’s term had it not been terminated, multiplied by (b) the sum of (i) the Average Monthly Revenue times five percent (5%) for lost future Royalty Fees, plus (ii) the Average Monthly Revenue times three and one-half percent (3.5%) for lost future System Services Charges |
Source: Item 18 — OTHER INCOME (LOSS), NET (FDD pages 187–399)
What This Means (2025 FDD)
According to The Standardx's 2025 Franchise Disclosure Document, if the franchise agreement is terminated before the end of its term, the franchisee must pay liquidated damages to The Standardx. The liquidated damages are calculated as the lesser of 36 months or the number of months remaining in the agreement, multiplied by the sum of lost future royalty fees and lost future system service charges. The lost future royalty fees are determined by multiplying the Average Monthly Revenue by 5%, and the lost future system services charges are determined by multiplying the Average Monthly Revenue by 3.5%.
This calculation aims to compensate The Standardx for the brand damages resulting from the early termination. The FDD states that these damages are difficult to estimate accurately, and proof of brand damages would be burdensome and costly. Therefore, the liquidated damages serve as a reasonable estimate of fair compensation to The Standardx.
It's important to note that the franchisee's payment of liquidated damages does not relieve them of other obligations. The franchisee must still pay any other amounts due to The Standardx under the agreement as of the termination date and comply with post-termination obligations, such as de-identification procedures. Additionally, if any law or regulation limits the franchisee's obligation to pay liquidated damages, the franchisee may be liable for any and all brand damages The Standardx incurs as a result of the breach.